Survey of Transport Fuel Demand Elasticities

There is a fairly widespread perception that the price of petrol is not particularly significant for the amount of petrol that is used – many people seem to act on the basis that ”I need my car and I’ll pay whatever it costs to drive it”. Over the years a large number of empirical studies into the price elasticity of petrol have been carried out throughout the world. This report contains a synthesis of the results of these studies. The results show quite clearly that in the longer term, e.g. 10 years, the price of petrol is of great significance for demand. A couple of the long-term mechanisms that lie behind this are that car owners buy more fuel-efficient cars if fuel is expensive and that people change their transport requirements. It is also of great significance that high fuel prices give car manufacturers a considerable incentive to develop more energy efficient engines. One conclusion is that tax on fuel is an effective means of long-term control to reduce climatic and other environmental impacts deriving from the transport sector